State Tax Shelters and State Taxation of Capital‪.‬

I. INTRODUCTION State income tax is a most demanding area of practice. It requires knowledge of federal income tax, constitutional issues that play no role in federal income tax, and the substitutes at the state level for the income tax. I have not specialized in this field and will not address many of the important doctrinal distinctions or policy options that occupy the time of the practitioner or state official. However, I have had long experience with the larger topic of this issue: tax shelters and the taxation of capital. I have also had some limited experience with real life issues in state tax planning. In any event, I am prepared to venture an overview of where I think we are with respect to the tax shelter problem and the greater issue surrounding state taxation of income from capital.